November 10, 2006

 

CBOT Soy Review on Thursday: Corrects lower on speculative sales

 

 

Chicago Board of Trade soybean futures stumbled lower Thursday, backpedaling in corrective fashion on speculative sales, as a lack of underpinning support from corn and overbought conditions combined to weigh on prices.

 

November soybeans finished 8 3/4 cents lower at US$6.57 1/2, and January soybeans ended 8 1/2 cents lower at US$6.69 1/2. December soymeal settled US$2.70 lower at US$198.30 per short tonne, while December soyoil ended 1 point lower at 27.71 cents a pound.

 

The market put a lot of premium into prices heading into Thursday's session, and with funds long already and corn setting back on a supportive crop report, cautious longs took the opportunity to square a few positions, said Jack Scoville, analyst with the Price Futures Group in Chicago.

 

The weak price action was aided by technical pressure, as the ability of nearby contracts to fill chart gaps beneath the market uncovered selling pressure to accelerate losses, traders said.

 

The absence of the markets outside crutch, corn futures, opened the door for price weakness to surface, traders said. The inability of futures to challenge Wednesday's contract highs and subsequent decline into a chart gap left from Wednesday attracted selling to pin prices in negative territory.

 

Bearish fundamentals, with record production, yield and ending stocks continue to keep people wondering how soybeans can sustain lofty price levels, as bullish traders were dealt a disappointing blow with corn retreating lower, Scoville added.

 

The USDA pegged 2006-07 soybean production at a record 3.204 billion bushels, up 15 million from October. Soybean yield is projected at a record 43.0 bushels per acre, up from the October projection of 42.8 bushels an acre. U.S. 2006-07 ending stocks are estimated at 565 million bushels, below the average of trade estimates at 583 million.

 

In pit trades, speculative funds were estimated sellers of 3,000 contracts, with UBS Securities selling 2,500 January, JP Morgan selling 500 November and Calyon Financial a seller of 300 January.

 

South American soybean futures ended lower, with the November futures settling 6 1/4 cents lower at US$7.20.

 

 

SOY PRODUCTS

 

Soy product futures ended mostly lower, with soymeal leading the descent. Soymeal was the downside leader of the products, setting back in a technical correction from overbought conditions, traders said. Weakness from soybeans added to the declines, with market bulls disappointed that prices backpedaled in the face of bullish export sales and bullish demand prospects from the USDA, analysts said.

 

Soyoil ended marginally lower, pulling back from earlier gains on profit-taking pressure. Futures were buoyed higher by strength in crude oil and spreading between the products for most of the day, analysts said.

 

However, a lack fresh supportive feature failed to sustain the firm tonnee as a late drop in soybeans uncovered selling interest, traders added.

 

December oil share ended at 41.13% and the November/December crush ended at 83 1/2 cents.

 

USDA said net weekly export sales for soymeal were 266,100 tonnes, compared to estimates of 50,000 to 125,000 tonnes.

 

In soymeal trades, JP Morgan bought 1,000 January and Rand Financial sold 1,000 December. Speculative funds were estimated sellers of 2,000 contracts.

 

In soyoil trades, commercials and speculative funds were net buyers on the day. Fimat bought 1,000 January, JP Morgan bought 600 January and 1,000 March. ADM Investor Services bought 500 March, Bunge Chicago bought 500 December, 400 January and 400 March. Tenco bought 500 July. Sellers were scattered among various commission houses.